Helen Moore v. MacQuarie Infrastructure Real Assets

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

17-264

HELEN MOORE, ET AL.

VERSUS

MACQUARIE INFRASTRUCTURE REAL ASSETS, ET AL.

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APPEAL FROM THE
NINTH JUDICIAL DISTRICT COURT
PARISH OF RAPIDES, NO. 251,417
CONSOLIDATED WITH 251,456; 251,515; 252,456; 252,458; AND 252,459
HONORABLE PATRICIA KOCH, DISTRICT JUDGE

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JOHN D. SAUNDERS
JUDGE

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Court composed of John D. Saunders, Billy H. Ezell, and Phyllis M. Keaty, Judges.

REVERSED AND REMANDED.

Jerold Edward Knoll, Sr.
Edmond H. Knoll
The Knoll Law Firm
233 South Main Street
Marksville, La 71351-0426
(318) 253-6200
COUNSEL FOR PLAINTIFFS/APPELLANTS:
L. E. L'Herisson
Helen Moore
Calvin I. Trahan

Andrew A. Lemmon
Attorney at Law
15058 River Road
Hahnville, LA 70057
(985) 783-6789
COUNSEL FOR PLAINTIFFS/APPELLANTS:
L. E. L'Herisson
Helen Moore

Paul Marett Brannon
Attorney at Law
4916 Lake Como Avenue
Metairie, LA 70006
(504) 430-1401
COUNSEL FOR INTERVENORS/APPELLEES:
William H. Seely
Charles L. McNeely

Lewis Kahn
Michael J. Palestina
Kahn Swick & Foti, LLC
216 Covington Street
Madisonville, LA 70447
(504) 455-1400
COUNSEL FOR PLAINTIFF/APPELLANT:
Calvin I. Trahan

W. Raley Alford, III
Jennifer L. Thornton
Eva J Dossier
Stanley, Reuter, Ross, Thornton & Alford, L.L.C.
909 Poydras, Suite 2500
New Orleans, LA 70112
(504) 523-1580
COUNSEL FOR DEFENDANTS/APPELLEES:
Cleco Corporation
Elton R. King
William L. Marks

Shelley Stewart, Jr.
Bruce Williamson
William H. Walker, Jr.
Peter M. Scott, III
Logan W. Kruger
Vicky A. Bailey
Darren J. Olagues

Edward J. Fuhr
Eric J. Feiler
Johnathon E. Schronce
Hunton & Williams LLP
951 E. Byrd Street
Richmond, VA 23219
(804) 788-8200
COUNSEL FOR DEFENDANTS/APPELLEES:
William H. Walker, Jr.
Peter M. Scott, III
William L. Marks
Shelley Stewart, Jr.
Vicky A. Bailey
Logan W. Kruger
Elton R. King
Bruce Williamson
Darren J. Olagues

James P. Gillespie
Matthew E. Papex
Kirkland & Ellis LLP
655 Fifteenth St., N.W.
Washington, DC 20005
(202) 879-5000
COUNSEL FOR DEFENDANTS/APPELLEES:
Cleco Partners L.P. (f.k.a. Como 1 L.P.)
Como 3, Inc.

Sebastiano Tornatore
Shannon L. Hopkins
Attorney at Law
733 Summer St., Suite 304
Stamford, CT 06901
(212) 363-7500
COUNSEL FOR INTERVENORS/APPELLEES:
William H. Seely
Charles L. McNeely

Vincent S. Wong
Attorney at Law
39 E. Broadway, Suite 304
New York, NY 01000-2000
(212) 584-2740
COUNSEL FOR INTERVENORS/APPELLEES:
William H. Seely
Charles L. McNeely

David T. Wissbroecker
Maxwell R. Huffman
Edward M. Gergosian
David A. Knotts
Robbins, Geller, Rudman & Dowd, LLP
655 W. Broadway, Suite 1900
San Diego, CA 92101
(619) 231-1058
COUNSEL FOR PLAINTIFFS/APPELLANTS:
Helen Moore
L. E. L’Herisson

Patrick P. Powers
Willie C. Brisco
8150 N. Central Expressway
Suite 1575
Dallas, TX 75206
(214) 239-8900
COUNSEL FOR PLAINTIFFS/APPELLANTS:
L. E. L’Herisson
Helen Moore

Hamilton P. Lindley
4125 W. Waco Drive
Waco, TX 76710
(254) 753-6437
COUNSEL FOR PLAINTIFF APPELLANT:
Helen Moore
L. E. L’Herisson

Edward E. Rundell
Charles Weems
Evelyn Breithaupt
Gold Weems Bruser Sues & Rundell
P.O. Box 6118
2001 MacArthur Drive
Alexandria, LA 71307
(318) 445-6471
COUNSEL FOR DEFENDANTS/APPELLEES:
Cleco Partners L.P. (f.k.a. Como 1 L.P.)
Como 3, Inc.

SAUNDERS, Judge.

This matter arises out of a suit regarding a corporate buyout/merger.

Plaintiffs, shareholders in the corporation, filed suit against Defendants, including

the board of directors of the corporation and the corporation’s Chief Executive

Officer, to enjoin the sale of the corporation. Plaintiffs allege, inter alia, that the

Chief Executive Officer engaged in self-dealing, acted in bad faith, and breached

his fiduciary duty of loyalty, good faith, and fair dealing, to the shareholders, when

he misled the board of directors to induce them to push through the sale/merger of

the corporation at an unfair price.

Plaintiffs filed an action against Defendants in which they sought injunctive

relief to enjoin the sale/merger of the corporation. Defendants filed exceptions,

including, but not limited to, those of no right of action and no cause of action.

After the injunctive relief was denied, the sale/merger was completed. Thereafter,

the trial court sustained Defendants’ exceptions of no right of action and no cause

of action and denied Plaintiffs’ request for injunctive relief. Plaintiffs appeal the

trial court’s ruling dismissing their claims.

FACTS AND PROCEDURAL HISTORY:

Plaintiffs, Helen Moore, Calvin I. Trahan, and Lawrence E. L’Herisson

(“Plaintiffs”), shareholders in Cleco Corporation (“Cleco”), initiated a class action

suit against a multitude of defendants: Bruce Williamson, Cleco’s Chief Executive

Officer; Cleco’s Board of Directors: William H. Walker, Jr., Elton R. King,

William L. Marks, Logan W. Kruger, Peter M. Scott, III, Shelley Stewart, Jr., and

Vicky A. Bailey; Darren J. Olagues, President of Cleco Power; Como 1 L.P.; and

Como 3 Inc. (collectively “Defendants”), in the Ninth Judicial District Court, to

recover damages personally sustained by them as a result of the sale/merger of

Cleco. In response, Defendants filed peremptory exceptions of no cause of action

and no right of action to Plaintiffs’ class action petition.

During the pendency of this action, hearings were held before the Louisiana

Public Service Commission (“LPSC”) with the LPSC eventually voting to approve

the sale/merger of Cleco. By joint motion, the temporary restraining order

Plaintiffs had obtained in an attempt to enjoin the sale of Cleco was dissolved. By

agreement, Plaintiffs amended their petition to include a direct cause of action

against Defendants. In the interim, the sale/merger of Cleco was perfected.

After oral arguments were presented to the court, the trial court sustained

Defendants’ peremptory exceptions of no cause of action and no right of action.

Plaintiffs timely filed a motion for devolutive appeal. Pursuant to that motion,

Plaintiffs are presently before this court alleging three assignments of error.

ASSIGNMENTS OF ERROR:

1. The District Court erred by granting Appellees’ exceptions of
both no right and no cause of action when the reasons for its ruling
only concerned whether Appellants have the right to bring their
asserted claims.

2. The District Court erred by finding that Appellants’ claims
were derivative in nature even though they sought to remedy damages
personally sustained rather than enforce a right of the Company.

3. The District Court erred to the extent that it applied any res
judicata effects to this action as a result of the Regulatory Proceeding
before the LPSC.

ASSIGNMENT OF ERROR NUMBER ONE:

Plaintiffs assert that the trial court erred in granting Defendants’ exceptions

of both no right and no cause of action. We find merit to this assertion.

“The function of the exception of no right of action is to
determine whether the plaintiff belongs to the class of persons to
whom the law grants the cause of action asserted in the suit.” Hood v.
Cotter, 2008-0215, p. 17 (La.12/2/08), 5 So.3d 819, 829. An appellate
court reviewing a lower court’s ruling on an exception of no right of
action should focus on whether the particular plaintiff has a right to
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bring the suit and is a member of the class of persons that has a legal
interest in the subject matter of the litigation, assuming the petition
states a valid cause of action for some person. Id.; Badeaux v.
Southwest Computer Bureau, Inc., 2005-0612, p. 6-7 (La.3/17/06),
929 So.2d 1211, 1217; Turner v. Busby, 2003-3444, p. 4 (La.9/9/04),
883 So.2d 412, 415-416; Reese v. State, Dept. of Public Safety and
Corrections, 2003-1615, p. 3 (La.2/20/04), 866 So.2d 244, 246.

The determination whether a plaintiff has a right to bring an
action raises a question of law. A question of law requires de novo
review. Holly & Smith Architects, Inc. v. St. Helena Congregate
Facility, Inc., 2006-0582, p. 9 (La.11/29/06), 943 So.2d 1037, 1045.

Eagle Pipe and Supply, Inc. v. Amerada Hess Corp., 10-2267, 10-2272, 10-2275,

10-2279, 10-2289, pp. 6-7 (La. 10/25/11), 79 So.3d 246, 255-56.

[T]he peremptory exception of no cause of action tests the legal
sufficiency of the plaintiff’s petition by determining whether the law
affords a remedy on the facts alleged. Scheffler v. Adams and Reese,
LLP, 06-1774 (La. 2/22/07), 950 So.2d 641. The exception is tried on
the face of the pleading, as La.Code Civ.P. art. 931 instructs that no
evidence may be introduced to support or to controvert the exception.
“[F]or purposes of resolving the issues raised by the exception, the
well-pleaded facts in the petition must be accepted as true.” Id. at 646.
The issue before the court in consideration of an exception of no cause
of action is whether, “on the face of the petition, the plaintiff is legally
entitled to the relief sought.” Id. Because the exception presents a
question of law, appellate review of the trial court’s ruling as to
whether the petition states a valid cause of action is de novo. Id.

Dixon v. City of Alexandria, 16-880, pp. 11-12 (La.App. 3 Cir. 5/31/17), 222 So.3d

739, 748-49 (second alteration in original). “The burden of showing that the

plaintiff has stated no cause of action is upon the exceptor. The public policy

behind the burden is to afford the party his day in court to present his evidence.”

City of New Orleans v. Bd. of Dir. of La. State Museum, 98-1170, p. 9 (La. 3/2/99),

739 So.2d 748, 755, citing Jarrell v. Carter, 577 So.2d 120 (La.App. 1 Cir.), writ

denied, 582 So.2d 1311 (La.1991)(emphasis added).

Although these two exceptions are often confused or improperly
combined with the same exception, the peremptory exceptions of no
right of action and no cause of action are separate and distinct. La.
C.C.P. art. 927(A)(4) and (5); Industrial Cos., Inc. v. Durbin, 02-0665,
p. 6 (La.1/28/03); 837 So.2d 1207, 1212. This court has recognized
that one of the primary differences between the exception of no right
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of action and no cause of action lies in the fact that the focus in an
exception of no right of action is on whether the particular plaintiff
has a right to bring the suit, while the focus in an exception of no
cause of action is on whether the law provides a remedy against the
particular defendant. Id.

Badeaux v. Southwest Computer Bureau, Inc., 05-612, 05-719, p. 6 (La. 3/17/06),

929 So.2d 1211, 1216-17.

In the case before us, the trial court granted both Defendants’ peremptory

exceptions of no cause of action and no right of action because it found that

Plaintiffs did not have either a cause of action or right of action under Louisiana

law. As such, the trial court dismissed the Plaintiffs’ petition.

No Right of Action

Defendants argue that the trial court correctly found that Plaintiffs had no

right of action because the suit is for a breach of fiduciary duty against Cleco’s

former director and officers, alleging only injury to Cleco and the entire body of its

shareholders. They argue that, under Louisiana Law, such a cause of action can

only be asserted derivatively. Plaintiffs lack standing to bring such a derivative

action because they are no longer shareholders of Cleco due to Cleco’s merger

being complete. Thus, Defendants request we uphold the trial court’s judgment

dismissing Plaintiffs’ claims. We find this argument lacks merit.

Former La.R.S. 12:91, repealed by 2014 La. Acts, No. 328, § 5, eff. Jan. 1,

2015, but effective at the time of the alleged breach of fiduciary duties, stated

(emphasis added):

§91. Relation of directors and officers to corporation and
shareholders

A. Officers and directors shall be deemed to stand in a fiduciary
relation to the corporation and its shareholders, and shall discharge
the duties of their respective positions in good faith, and with that
diligence, care, judgment, and skill which ordinary prudent men
would exercise under similar circumstances in like positions; however,
a director or officer shall not be held personally liable to the
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corporation or the shareholders thereof for monetary damages unless
the director or officer acted in a grossly negligent manner as defined
in Subsection B of this Section, or engaged in conduct which
demonstrates a greater disregard of the duty of care than gross
negligence, including but not limited to intentional tortious conduct or
intentional breach of his duty of loyalty. Nothing herein contained
shall derogate from any indemnification authorized by R.S. 12:83.

B. As used in this Section, “gross negligence” shall be defined
as a reckless disregard of or a carelessness amounting to indifference
to the best interests of the corporation or the shareholders thereof.

C. A director or officer who makes a business judgment in good
faith fulfills the duty of diligence, care, judgment, and skill under
Subsection A of this Section if the director or officer:

(1) Does not have a conflict of interest with respect to the
subject of the business judgment.

(2) Is informed with respect to the subject of the business
judgment to the extent the director or officer reasonably believes to be
appropriate under the circumstances.

(3) Rationally believes that the business judgment is in the best
interests of the corporation and its shareholders.

D. In fulfilling his duties under this Section, a director or officer
is entitled to rely upon records and other materials and persons as
specified in R.S. 12:92(E).

E. A person alleging a breach of the duty of diligence, care,
judgment, and skill owed by an officer or director under Subsection A
shall have the burden of proving the alleged breach of duty, including
the inapplicability of the provisions as to the fulfillment of the duty
under Subsections C and D and, in a damage action, the burden of
proving that the breach was the legal cause of damage suffered by the
corporation.

F. The provisions of this Section shall apply to all business
organizations, whether incorporated or unincorporated, formed under
Louisiana law.

In Crochet v. Cisco Sys., Inc., 02-1357, p. 5 (La.App. 3 Cir. 5/28/03), 847

So.2d 253, 256, writ denied, 03-1838 (La. 10/17/03), 855 So.2d 765 (first

alteration in original), this court wrote the following:

“[A] claim alleging corporate mismanagement, and a
resulting drop in the value of a company’s stock is a
classic derivative claim; the alleged wrong harms the
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corporation directly and all of its shareholders indirectly.
The fact that such a claim is asserted in the context of a
merger does not change its fundamental nature.”

[Parnes v. Bally Entertainment Corp., 722 A.2d 1243, 1245
(Del.1999)].

Similarly, in Louisiana, the jurisprudence requires an injury that
is “special” or unique to the shareholder. “The American Law
Institute has suggested this test for distinguishing direct from
derivative claims: if a shareholder can recover in a suit only by
showing that the corporation was injured, then the suit is derivative in
nature, even if the corporate injury does cause indirect harm to the
shareholder, while if a recovery can be granted without a proof of a
corporate loss, then the suit is considered to be direct.” Morris &
Holmes, 8 La.Civ.Law Treatise-Business Organizations § 34.03
(1999). “The general rule is that the right to an action against officers
and directors for mismanagement or fraud that causes loss to the
corporation is an asset of the corporation and may be asserted
secondarily by a shareholder through a shareholder’s derivative suit.”
Landry v. Thibaut, 523 So.2d 1370, 1376 (La.App. 5 Cir.), writ denied,
526 So.2d 809 (La.1988).

However, there may be instances in which the breach of fiduciary duty

causes a direct loss to the shareholder, but not to the corporation, in which case the

shareholder may have a right to sue individually. Thornton ex rel. Laneco Const.

Systems, Inc. v. Lanehart, 97-2871 (La.App. 1 Cir. 1/28/98), 723 So.2d 1127, writ

denied, 99-177 (La. 3/19/99), 740 So.2d 115. The Louisiana First Circuit Court of

Appeal held in Wilson v. H.J. Wilson Co., Inc., 430 So.2d 1227 (La.App. 1 Cir.),

writ denied, 437 So.2d 1166 (La.1983) that La.R.S. 12:91 expressly extended the

fiduciary relationship to shareholders. As such, it found that a valid right of action

existed for shareholders when the breach of fiduciary duty caused a personal loss,

citing Noe v. Roussel, 310 So.2d 806 (La.1975).

Here, we find that Plaintiffs have asserted a right of action. Plaintiffs’

petition avers that Defendants caused Plaintiffs damage by knowingly selecting a

sale/merger style that resulted in a windfall reward to them while disregarding the

damage to Plaintiffs, constituting a breach of their fiduciary duty to Plaintiffs. In

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typical derivative suits, shareholders seek to undo deals made by corporate

employees in order to recoup corporate assets, or seek to have a corporation make

a deal in the corporation’s best interest. Plaintiffs are not attempting to do either

here.

Rather, Plaintiffs are attempting to recover what they claim are losses they

personally sustained when Defendants engaged in practices that sold/merged Cleco

for a price less than its potential, using a method more beneficial to Defendants,

personally. Cleco, the corporation, did not suffer any loss according to Plaintiffs’

petition in this regard. Its status would change from existing as a corporation to no

longer existing in the same capacity because of the merger, regardless of the price

paid in order to have that merger occur. Thus, according to some of the claims

asserted in Plaintiffs’ petition, the loss occurred to Plaintiffs, but made no

meaningful difference to the corporation. Accordingly, we find that the trial court

erred in sustaining Defendants’ exception of no right of action.

While this court is aware of cases that may have a differing point of view,

we note that the facts present in this case merit this result, as it is more in line with

traditional notions of fairness. A differing result would grant immunity to a

corporate executive who sought out a merger with unclean hands. A shareholder

who is victim to such a situation is left with no access to our courts for recourse.

Prior to the merger, such an innocent shareholder could not bring an action given

the lack of ripeness of the claim, i.e., the financial harm would have yet to occur.

After the merger, the innocent, now former shareholder is left with no avenue to

recover any damages due to a supposed no right of action, because any such suit

must be derivative and the corporation no longer exists. Such a result also violates

a strong public policy of a party having its day in court. We find such a result

untenable.
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No Cause of Action

Defendants argue that the trial court correctly sustained their exception of no

cause of action based on the absence of a direct cause of action. As stated above,

we find that a direct cause of action existed at the time the suit was filed under

former La.R.S. 12:91. See Thornton, 723 So.2d 1127, Wilson, 430 So.2d 1227,

and Noe, 310 So.2d 806. As such, we find that Defendants’ argument to be

without merit and that the trial court erred in sustaining Defendants’ exception of

no cause of action.

ASSIGNMENT OF ERROR NUMBER TWO:

The Plaintiffs assert that the district court erred in finding that their claims

were derivative in nature, even though they sought to remedy damages personally

sustained rather than to enforce a right of the company. Our finding above in

Assignment of Error Number One discusses the issue raised in this assignment of

error and pretermits the need to address it.

ASSIGNMENT OF ERROR NUMBER THREE:

The Plaintiffs contend that the trial court erred to the extent that it applied

any res judicata effects to this action as a result of the regulatory proceeding before

the LPSC. This contention is without merit.

A de novo review is appropriate when reviewing a determination of the res

judicata effect of a prior judgment, because such a determination if a question of

law. Fogleman v. Meaux Surface Prot., Inc., 10-1210 (La.App. 3 Cir. 3/9/11), 58

So.3d 1057, writ denied, 11-712 (La. 5/27/11), 63 So.3d 995.

The doctrine of res judicata is found in La.R.S. 13:4231, and bars a

subsequent action when the following elements are satisfied:

(1) the judgment is valid; (2) the judgment is final; (3) the parties are
the same; (4) the cause or causes of action asserted in the second suit
existed at the time of final judgment in the first litigation; and (5) the
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cause or causes of action asserted in the second suit arose out of the
transaction or occurrence that was the subject matter of the first
litigation.

Burguieres v. Pollingue, 02-1385, p. 8 (La. 2/25/03), 843 So.2d 1049, 1053.

It is well settled that the trial court’s “oral or written reasons for
judgment form no part of the judgment, and that appellate courts
review judgments, not reasons for judgment.” Bellard v. Am. Cent. Ins.
Co., 07-1335, p. 25 (La. 4/18/08), 980 So.2d 654, 671; La.Code Civ.P.
art. 1918. “The written reasons for judgment are merely an explication
of the Trial Court’s determinations. They do not alter, amend, or
affect the final judgment being appealed. . . .” State in the Interest of
Mason, 356 So.2d 530 (La.App. 1 Cir. 1977).

GBB Props. Two, LLC v. Stirling Props., LLC, 17-384, pp. 3-4 (La.App. 3 Cir.

7/5/17), 224 So.3d 1001, 1004 (alteration in original).

In the case before us, the judgment of the trial court states, “IT IS

ORDERED that Defendant[s’] peremptory exceptions of no right of action and no

cause of action are SUSTAINED WITH PREJUDICE.

IT IS FURTHER ORDERED that Plaintiff[s’] case is dismissed.” The

judgment was then signed on September 26, 2016. There is no reference to La.R.S.

13:4231, res judicata, issue preclusion, or the like in the judgment. Accordingly,

regardless of whether the trial court made reference to Plaintiffs’ concerns having

been addressed by the LPSC at several public hearings and findings of the LPSC’s

Administrative Law Judge regarding the same arguments, the judgment in this case

has nothing to do with res judicata. Thus, we will not address this assignment of

error.

CONCLUSION:

Plaintiffs, Helen Moore, Calvin I. Trahan, and Lawrence E. L’Herisson raise

three assignments of error regarding the dismissal of their class action petition

against Bruce Williamson, William H. Walker, Jr., Elton R. King, William L.

Marks, Logan W. Kruger, Peter M. Scott, III, Shelley Stewart, Jr., Vicky A. Bailey,

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Darren J. Olagues, Como 1 L.P., and Como 3 Inc. arising from the sale/merger of

Cleco Corporation. We find merit to the first assignment of error, that the trial

court erroneously granted exceptions of no right of action and no cause of action

that dismissed the class action petition. This finding pretermits the second

assignment of error. We decline to address the third assignment of error, as it

relates to statements made by the trial court in its reasons for judgment rather than

the judgment. We remand this matter to the trial court for further proceedings

consistent with this opinion. Costs of this proceeding are assessed to Bruce

Williamson, William H. Walker, Jr., Elton R. King, William L. Marks, Logan W.

Kruger, Peter M. Scott, III, Shelley Stewart, Jr., Vicky A. Bailey, Darren J.

Olagues, Como 1 L.P., and Como 3 Inc.

REVERSED AND REMANDED.

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